Logistics Improvement – A Case Study

Introduction

Optimizing logistical activities is a vital part of any supply chain since the benefits vary from enhancing operational efficiencies and creating competitive advantages, to improving your sustainability. For our client, who deals with industrial spare parts, improving logistics was essential for minimizing downtime and increasing operational continuity.

Our client was facing several challenges. Their logistical activities took place in more than 10 different sites where, over time, more and more deviations from the standard processes were created. As a result, the implementation of corporate improvement projects required a lot of local tailoring activities, best practices could not be shared between sites, and management was steering blind in the sense that there was no way to objectively measure and manage the performance of each site. All of this would soon prove to be a huge burden with the upgrade of their ERP package to SAP S4/HANA.

In this context, we were brought on board to understand the way of working in each of the local sites, and make sure we converge back to a standardized way of working. In tackling these kinds of challenges, we always combine:

Logistical process improvement

Building a roadmap that improves your logistical processes, is no different than building any other improvement roadmap. It is important to identify the current gaps and bottlenecks in the process, define an end goal that is in line with your supply chain strategy, and come up with a plan to reach that long-term goal.

As in any project, our certified professionals in logistics and lean six sigma took a pragmatic approach that was tailored to the culture of the client. We put significant effort in estimating and quantifying the potential benefits, but equally important we thoroughly estimated the effort that would be needed to actually implement the proposed improvements. Only then, you can make an informed decision on which initiatives to launch and draft a realistic implementation plan that considers both financial as human resources.

Since this company’s most important metric is guaranteeing operational uptime of its assets, we mainly focused on identifying initiatives that reduced the process lead times. We implemented quick wins that reduced ‘waste’ in the processes, such as eliminating unnecessary movements of people and equipment and non-value adding process steps, eliminating rework that arose due to lack of knowledge of internal customers, as well as installing 5S initiatives that reduced rework.

Next to these low effort improvements, we identified larger initiatives that required more resources to implement, but also provided larger upward potential. Our analysis showed that by rearranging the inventory within the existing warehouse setup, up to 23% of the total distance traveled by the warehouse operators could be eliminated, reducing the total lead time with approximately 12%. Other large improvements would entail the introduction of mobile scanners and the implementation of an intra-logistics milkrun that would bring the spare parts to the technician in stead of the other way around, improving the uptime of the technician with a staggering 10%.

Support by digital solutions

The transition to SAP S/4HANA is often perceived as a daunting task, filled with complexity and requiring significant resources. The new logistical processes were so intricate that a thorough process and tool assessment was required. If the installed processes and tools didn't match the new reality, it would have been like trying to run a marathon in flip-flops. However, by embracing these changes, we were able to create a more efficient and effective system.

Our understanding of the standard SAP package allowed us to streamline processes without relying on the infamous 'Z'-transactions. Custom transactions often come with hefty price tags and ongoing maintenance headaches, and are therefore to be avoided. By adhering to standard processes, we helped our client avoid unnecessary financial surprises and operational difficulties during the SAP S/4 HANA implementation.

One of the key challenges we addressed was the corporate management's lack of visibility into their operations. Flying blind is never a good strategy, especially for overseeing projects. To resolve this, we redefined the logistical KPIs and set new targets, enabling management to quickly spot deviations and address issues at their root. We also designed a user-friendly Power BI dashboard, providing management with clear, intuitive insights into worksite comparisons and project statuses. The dashboard functions as a powerful GPS — no more guesswork, just accurate, real-time data guiding their decisions.

Drive the change

The success of a project like this is not determined by the roadmap as such, but by the value that is captured when the proposed solutions are implemented, and when the change is accepted by the people that are doing the job on a daily basis. Therefore, we are strong believers of the importance of change management in our project management approach.

If you really want to drive change in process optimizations, it is important to involve your employees very early in the process. No one is better placed to identify bottlenecks in the process than the people who are doing the job every day. By visiting all the warehouses in the different locations and capturing the input of the local workforce from the beginning, we managed to convince people on the floor of the benefits of the project for them. The biggest compliment we received was that from a warehouse operator that has been working for the company for nearly 35 years who said: “I was skeptical about the project and what it would mean for me, but you’ve managed to listen to our concerns and the changes have made my life easier ever since.” Finding the balance between listening to local and individual needs and balancing them with corporate goals, is a challenge a lot of companies face and should therefore receive the appropriate attention.

Communication and trust are also key success factors in a change process. That’s why we used the ADKAR ® methodology to bring structure in the communication approach. Next to that, the fact that we identified and implemented quick wins from early in the process, has built trust in the project team and created momentum for larger initiatives.